Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Amend facts, proposed transactions and rulings in ruling 2000-005546.
Position: N/A
Reasons: Amendments are not material and will not affect the rulings given.
XXXXXXXXXX 2001-007103
XXXXXXXXXX, 2001
Dear XXXXXXXXXX:
Re: XXXXXXXXXX
Advance Income Tax Ruling 2000-005546, dated XXXXXXXXXX , 2001
This is in reply to your letter of XXXXXXXXXX, wherein you advised us of certain amendments to the proposed transactions described in the above-referenced Advance Income Tax Ruling (hereinafter referred to as the "Ruling Letter").
Any reference herein to paragraphs are references to those contained in the Ruling Letter and any defined terms used in this letter have the meanings assigned to them in the Ruling Letter.
The Ruling Letter is hereby amended as follows:
1. The reference to "transfer agreement" in the last sentence of paragraph 7 is hereby deleted and replaced by "transfer agreement (the "Transfer Agreement")".
2. The following new paragraphs will be added after paragraph 12 under the heading "Proposed Transactions":
"12.1 The Transfer Agreement will define the term "Transfer Date" as follows:
"Transfer Date" means the last Business Day (as defined in the Transfer Agreement) of the month following the later of (i) the month of receipt of the consent of XXXXXXXXXX to the transfer of assets from the Fund (as defined in the Transfer Agreement) as contemplated herein, and (ii) the month in which registration of the XXXXXXXXXX Plans by all Applicable Pension Authorities (as defined in the Transfer Agreement) is completed. If the later of (i) or (ii) occurs before the XXXXXXXXXX day of a month, the Employer shall use its best efforts to cause the Transfer Date to be the last Business Day (as defined in the Transfer Agreement) of the month.
It is currently anticipated that the Transfer Date will likely occur on or before XXXXXXXXXX.
12.2 The Transfer Agreement will include the term "Postponed Transfer Date". The Postponed Transfer Date will apply to the properties that cannot be transferred by the Transfer Date because the required consent of other investors in those properties have not been received by the Transfer Date. The Postponed Transfer Date will be the earliest date following the Transfer Date on which it is possible to transfer the properties (i.e., when all of the requisite consents have been received). It is anticipated that each Postponed Transfer Date will be within approximately XXXXXXXXXX days after the Transfer Date."
3. Paragraph 13 is hereby deleted and replaced by:
"13. In order to facilitate the transfer of the Non-Marketable Assets to the XXXXXXXXXX Funds in the manner contemplated in 7 above, the following transactions are proposed.
(a) The Employer will cause Trustco, as trustee for the Fund, to incorporate six holding corporations (the "Realty Holdco", the "Realty Holdco 2", the "Mortgage Holdco", the "Mortgage Holdco 2", the "Investment Holdco" and the "Investment Holdco 2", collectively referred to as the "Holdcos") under the XXXXXXXXXX Trustco, as trustee for the Fund, will subscribe for one common share of each of the Holdcos and will hold each share in trust for the Fund. The articles of Realty Holdco and Realty Holdco 2 will contain restrictions limiting their activities and investments in the manner referred to in subparagraph 149(1)(o.2)(ii) of the Act. The articles of each of Mortgage Holdco, Mortgage Holdco 2, Investment Holdco and Investment Holdco 2 will contain restrictions limiting their activities and investments in the manner referred to in subparagraph 149(1)(o.2)(iii) of the Act. In the case of each of the Holdcos, the articles will restrict ownership of all shares and rights to acquire shares to those persons referred to in subparagraph 149(1)(o.2)(iv) of the Act.
(b) To the extent that any necessary consents to transfer assets have been obtained by the Transfer Date or no consent is necessary in respect of the particular property, the Property Interest and the shares of the Real Property Holdcos will be transferred to Realty Holdco in return for shares of Realty Holdco, which will be held by Trustco, as trustee for the Fund.
Where required consents to transfer assets have been obtained after the Transfer Date in respect of the particular property, the Property Interest and the shares of the Real Property Holdcos will be transferred to Realty Holdco 2 in return for shares of Realty Holdco 2, which will be held by Trustco, as trustee for the Fund.
(c) Each of Realty Holdco and Realty Holdco 2 will constitute a "real estate corporation" within the meaning of that term in section 1 of Schedule III to the PBSA Regulations. Realty Holdco and Realty Holdco 2 will provide to the Plan and to any XXXXXXXXXX Plan to which are transferred shares representing more than 30% of its voting shares the undertaking contemplated by subsection 12(1) of Schedule III of the PBSA Regulations. Among other things, as a result of this undertaking, Realty Holdco and Realty Holdco 2 will agree to restrict their investments (other than in real property or in securities of other "real estate corporations") to those authorized for the Plan or the XXXXXXXXXX Plan, as the case may be, and will agree not to invest in securities of any other real estate corporation carrying more than 30% of the voting rights with respect to such other corporation unless such other corporation provides a similar undertaking. Each Real Property Holdco the shares of which are transferred to Realty Holdco or Realty Holdco 2 will provide such undertaking.
(d) To the extent that any necessary consents to transfer assets have been obtained by the Transfer Date or no consent is necessary in respect of the particular property, the interest of the Fund in the mortgage portfolio and the Participating Bonds will be transferred to Mortgage Holdco in return for shares of Mortgage Holdco, which will be held by Trustco, as trustee for the Fund. Mortgage Holdco will constitute an "investment corporation" within the meaning of that term in section 1 of Schedule III to the PBSA Regulations.
Where required consents to transfer assets have been obtained after the Transfer Date in respect of the particular property, the interest of the Fund in the mortgage portfolio and the Participating Bonds will be transferred to Mortgage Holdco 2 in return for shares of Mortgage Holdco 2, which will be held by Trustco, as trustee for the Fund. Mortgage Holdco 2 will constitute an "investment corporation" within the meaning of that term in section 1 of Schedule III to the PBSA Regulations.
(e) To the extent that any necessary consents to transfer assets have been obtained by the Transfer Date or no consent is necessary in respect of the particular property, any Private Equity Assets that may be held by the Fund under the PBSA Regulations will be transferred to Investment Holdco in return for shares of Investment Holdco, which will be held by Trustco, as trustee for the Fund.
Where required consents to transfer assets have been obtained after the Transfer Date in respect of the particular property, any Private Equity Assets that may be held by the Fund under the PBSA Regulations will be transferred to Investment Holdco 2 in return for shares of Investment Holdco 2, which will be held by Trustco, as trustee for the Fund.
(f) Each of Investment Holdco and Investment Holdco 2 will constitute an "investment corporation" within the meaning of that term in section 1 of Schedule III to the PBSA Regulations. Pursuant to the definition of the term "investment corporation" in the PBSA Regulations, Investment Holdco and Investment Holdco 2 will be limited in their investments to those that are authorized for a plan under the PBSA Regulations. Investment Holdco and Investment Holdco 2 will provide to the Plan and to any XXXXXXXXXX Plan to which are transferred shares representing more than 30% of the voting shares of Investment Holdco or Investment Holdco 2 the undertaking contemplated by subsection 14(1) of Schedule III of the PBSA Regulations. Among other things, as a result of this undertaking, each of Investment Holdco and Investment Holdco 2 will agree not to invest in securities of any other investment corporation carrying more than 30% of the voting rights with respect to such other corporation unless such other corporation provides a similar undertaking.
(g) In connection with the transfer of the Private Equity Assets to Investment Holdco and Investment Holdco 2, Investment Holdco and Investment Holdco 2 will succeed to any rights and obligations of the Fund under shareholders', limited partnership or similar agreements relating to the transferred Private Equity Assets, including the Cash Call Obligations that relate to the Private Equity Assets that it has received. The Fund will transfer to Investment Holdco, in return for shares of Investment Holdco, sufficient cash to permit Investment Holdco to satisfy anticipated Cash Call Obligations related to the property it has received. The Fund will also transfer to Investment Holdco 2, in return for shares of Investment Holdco 2, sufficient cash to permit Investment Holdco 2 to satisfy anticipated Cash Call Obligations related to the property it has received.
(h) Investment Holdco and Investment Holdco 2 will each make the election contemplated by subsection 259(2) of the Act within the time referred to in subsection 259(3) applicable from the time that they acquire any assets. Depending on the circumstances, it is possible that Realty Holdco, Realty Holdco 2, Mortgage Holdco and Mortgage Holdco 2 will at some point make such an election.
(i) As soon as practicable following receipt of the consent of the XXXXXXXXXX to the transfer of assets described in 7 above, the Employer will cause beneficial ownership of the shares of the Holdcos to be transferred to the XXXXXXXXXX Funds and Trustco will hold the shares in trust for the XXXXXXXXXX Funds. It is anticipated that the XXXXXXXXXX Entities will enter into an agreement providing for the management and governance of the Holdcos, XXXXXXXXXX."
4. Paragraph 14 is hereby deleted and replaced by:
"14. It is anticipated that the Transfer Agreement referred to in 7 above will contemplate that the transfer of assets to the XXXXXXXXXX Funds may need to occur in more than one stage although a substantial (over XXXXXXXXXX% on a market value basis) portion of the assets likely will be transferred by the Transfer Date. The balance of the assets will be transferred by the Postponed Transfer Date. In addition, a reserve is expected to be held back within the Fund pending final determination of expenses and the net balance would be transferred at a future date. It is also possible that there could be
a deferred receipt of proceeds of a non-transferable asset or of an asset currently being sold and in that event the net proceeds would be transferred to the XXXXXXXXXX Funds subsequent to the main asset transfers described above."
5. Paragraph 15 is hereby deleted and replaced by:
"15. XXXXXXXXXX."
6. The references to "Realty Holdco" in Ruling A are hereby deleted and replaced by "Realty Holdco and Realty Holdco 2".
7. The reference to "Investment Holdco" in Ruling B is hereby deleted and replaced by "Investment Holdco and Investment Holdco 2".
8. The references to "Investment Holdco" in Ruling C are hereby deleted and replaced by "Investment Holdco and Investment Holdco 2".
9. The references to "Realty Holdco" in Ruling D are hereby deleted and replaced by "Realty Holdco and Realty Holdco 2".
10. The references to "Investment Holdco" in Ruling E are hereby deleted and replaced by "Investment Holdco and Investment Holdco 2".
11. The reference to "Supplemental Plan is implemented by XXXXXXXXXX " in the last paragraph is hereby deleted and replaced by "proposed transactions are completed by XXXXXXXXXX".
Notwithstanding the above changes, we confirm that, subject to the conditions set out therein, the rulings given in the Ruling Letter will continue to be binding on the Canada Customs and Revenue Agency in accordance with the practice outlined in Information Circular 70-6R4 dated January 29, 2001, provided that the proposed transactions are completed by XXXXXXXXXX.
Yours truly,
XXXXXXXXXX
for Director
Financial Industries Division
Income Tax Rulings Directorate
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